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EUROPEAN COMMISSION
DG Competition
CASE M.8228 - FACEBOOK /
WHATSAPP
(Only the English text is authentic)
MERGER PROCEDURE
REGULATION (EC) 139/
Article 14(1) Regulation (EC) 139/
Date: 17.05.
This text is made available for information purposes only. A summary of this decision is published in all EU languages in the Official Journal of the European Union.
Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets.
EUROPEAN COMMISSION
Brussels, 17.5. C(2017) 3192 final
PUBLIC VERSION
COMMISSION DECISION
of 17.5.
imposing fines under Article 14(1) of Council Regulation (EC) No. 139/2004 for the supply by an undertaking of incorrect or misleading information (Case No. M.8228 – FACEBOOK / WHATSAPP)
(Only the English version is authentic)
COMMISSION DECISION
of 17.5.
imposing fines under Article 14(1) of Council Regulation (EC) No. 139/2004 for the supply by an undertaking of incorrect or misleading information (Case No. M.8228 – FACEBOOK / WHATSAPP)
(Only the English version is authentic)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings^1 , and in particular Article 14(1) thereof,
Having given Facebook, Inc. and Facebook Ireland Limited the opportunity in accordance with Article 18 of Regulation (EC) No 139/2004to make known their views on the objections raised by the Commission,
Having regard to the opinion of the Advisory Committee on Concentrations^2 ,
Having regard to the final report of the Hearing Officer in this case^3 ,
Whereas:
1. INTRODUCTION
1.1. The undertakings concerned and the concentration
(1) Facebook, Inc. is a provider of websites and applications for mobile devices (" apps ") offering social networking, consumer communications and photo and video-sharing functionalities. Facebook, Inc. also provides online advertising space. In particular, it offers the social networking platform "Facebook" (" FB "), the consumer communications app "Facebook Messenger" (" FBM ") and the photo and video- sharing platform "Instagram" (" IG "). In the EEA, Facebook, Inc. operates via its wholly-owned subsidiary, Facebook Ireland Limited (Facebook, Inc. and Facebook Ireland Limited are collectively hereinafter referred to as " Facebook ").
(2) WhatsApp Inc. is a provider of consumer communications services via the mobile app "WhatsApp" (" WA "). It does not sell either advertising space or the user data which it collects.
(3) WhatsApp Inc. has been a subsidiary of Facebook, Inc. since 6 October 2014. The acquisition of control within the meaning of Article 3(1)(b) of the Regulation (EC)
(^1) OJ L 24, 29.1.2004, p. 1. With effect from 1 December 2009, the Treaty on the Functioning of the
European Union ("TFEU") introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this Decision. (^2) OJ C ...,...200. , p.... (^3) OJ C ...,...200. , p....
No 139/2004 (" the Merger Regulation ") of the whole of the undertaking of WhatApp Inc. by Facebook was reviewed by the Commission under Case No. M.7217 – Facebook/WhatsApp. The acquisition is hereinafter referred to as " the Transaction. "^4
1.2. The merger review proceedings
(4) On 19 February 2014, Facebook, Inc. and WhatsApp Inc. (" the Parties ") signed an agreement entitled " the Agreement and Plan of Merger and Reorganization " pursuant to which WhatsApp Inc. would successively merge with and into wholly- owned subsidiaries of Facebook, Inc. and thereby be acquired by Facebook, Inc.
(5) On 29 May 2014, Facebook, Inc. (" the Notifying Party ") submitted a first draft of the notification form in Case No. M.7217 – Facebook/WhatsApp to the Commission.
(6) On 6 June 2014, the Commission sent its questions on this first draft to the Notifying Party. The Notifying Party submitted a reply on 18 June 2014.
(7) On 25 June 2014, by way of follow-up to that reply, the Commission sent the Notifying Party a second set of pre-notification questions.
(8) The reply to this second set of questions was not submitted as a self-standing document, but rather it was incorporated into the second draft of the notification form submitted to the Commission by the Notifying Party on 1 July 2014.
(9) On 7 August 2014, the Commission sent further follow-up questions to the Parties. These questions covered a broad range of topics, including potential relevant market definitions, market share metrics and internal documents of the Parties. They also included questions on possible cross-platform communication between WA and FBM.^5
(10) On 20 August 2014, the Notifying Party submitted a reply to this third set of questions and, in parallel, submitted a third draft of the notification form incorporating its latest replies.
(11) On 25 August 2014, the Commission followed up with further questions to the Parties. In these questions, the Commission requested further clarification on the possibility of cross-platform communication between FB and WA as well as on the possible linking or matching of customer profiles on WA with those customer profiles on FB.^6 No stand-alone reply to these questions was provided; instead, they were addressed directly in the final notified Form CO.^7
(^4) The concentration arising from the Transaction did not have a Union dimension within the meaning of
Article 1(2) or (3) of the Merger Regulation but it was referred to the Commission pursuant to Article 4(5) of that Regulation. On 19 May 2014, the Notifying Party informed the Commission by means of a reasoned submission that the concentration arising from the Transaction should be examined by the Commission pursuant to Article 4(5) of the Merger Regulation. The concentration arising from the Transaction fulfilled the conditions set out in that Article as it was capable of being reviewed under the national competition laws of […]. Since none of the Member States competent to examine the concentration expressed its disagreement as regards the request to refer the case, the concentration was deemed to have a Union dimension by virtue of Article 4(5) of the Merger Regulation. (^5) See Section 2.2.1.1. (^6) See Section 2.2.1.1. (^7) Four more exchanges took place between the Commission and the Parties during the pre-notification
phase: (i) on 8 July 2014, a list of preliminary issues identified by the Commission in the course of its pre-notification contacts with third parties was provided to the Notifying Party to allow it to present its
assessment, the Commission also analysed third-party complaints about possible forms of integration between the functionalities of FB and WA.
1.3.1. Consumer communications services
(18) The Commission assessed the impact of the Transaction on a relevant product market encompassing consumer communications apps on smartphones offered for all operating systems (" OS ") and including all communication functionalities. The Commission considered the geographic scope of this product market to be at least EEA-wide, if not worldwide.
(19) The Commission found that FBM and WA were not close competitors with respect to consumer communications services due to a number of differences between them, notably in the following areas: (i) the identifiers (" ID ") used to access the services (phone number for WA and FB ID for FBM); (ii) the source of the contacts (the user's handset address book for WA and all FB users for FBM); (iii) the user experience (richer in FBM); and (iv) the intensity of usage of each app (significantly more messages per active user exchanged via WA than via FBM).
(20) Although consumer communications apps are characterised by network effects^11 , the Commission considered that, post-Transaction, such network effects would be unlikely, on balance, to shield the merged entity from competition from new and existing consumer communications apps, due to the existence of certain mitigating factors.
1.3.2. Social networking services
(21) As for social networking services^12 , the Commission found that, while consumer communications apps like FBM and WA offered certain elements that were typical of social networking services, in particular sharing of messages and photos, there were important differences between WA and social networking services. For example, social networks tended to offer a richer social experience and a larger number of functionalities. The Commission ultimately left open the precise delineation of the market for social networking services. It concluded that the geographic scope for the market was at least EEA-wide, if not worldwide.
(22) The Commission found no indication of any plans by WhatsApp Inc. to become a potential competitor in social networking services. Nevertheless, the Commission assessed the likely competitive effects of the Transaction under a broader definition of the potential market for social networking services, assuming that both the Parties were already actual competitors in that market.
(23) Based on the considerable differences between the functionalities and focus of each of the Parties, the Commission concluded that they were not close competitors in that potential market.
1.3.3. Online advertising services
(24) The Commission carried out its assessment of the Transaction on the market for online advertising services leaving open the question of whether a further
(^11) Network effects arise when the value of a product or service to its users increases with the number of
other users of that product or service. (^12) Social networking services can be described as services which enable users to connect, share,
communicate and express themselves online or through a mobile app.
segmentation of the product market between search and non-search online advertising was appropriate. It considered the geographic scope of the market to be national or alongside linguistic borders within the EEA.
(25) The Commission noted that the Transaction would not give rise to any horizontal overlaps in the market for online advertising or any sub-segment of that market as WhatsApp Inc. was not active in that market.^13 It also noted that the Transaction would not increase the amount of user data potentially available to Facebook for advertising purposes as WA did not collect any such data at that time that were valuable for advertising purposes.
(26) Nonetheless, the Commission examined whether the Transaction could strengthen Facebook's position in online advertising and hamper competition by Facebook either (i) introducing advertising on WA, or (ii) using WA as a potential source of user data for improving the targeting of Facebook's advertising services outside WA (or doing both those things).
(27) The Commission concluded that, regardless of whether Facebook would introduce advertising on WA, there would continue to be a sufficient number of actual or potential competitors equally as well-placed as Facebook to offer targeted advertising. It also concluded that, regardless of whether Facebook would start using WA user data to improve targeted advertising on Facebook's social network, there would continue to be a large amount of internet user data that were valuable for advertising purposes and that were not within Facebook's exclusive control. It therefore concluded that the Transaction would not give rise to serious doubts as to its compatibility with the internal market as regards the market for the provision of online advertising services, including any potential sub-segments of it.
1.3.4. The third-party complaints about integration between FB and WA
(28) During the market investigation, several third parties (including the one that submitted the Third Party Paper) suggested that, following the Transaction, some form of integration of WA with FB (including FBM) was likely. Examples of such forms of integration given by third parties included cross-platform communication between WA and FB, enabling WA and FB users to communicate with each other or enabling FB posts or status updates to be delivered to WA, posting to FB from WA, or merging both services into one single platform. Such integration could also allow Facebook to have access to WA data. In the view of these third parties, integration of WA and FB could therefore strengthen the Parties' position in the markets for consumer communications apps, social networking services and online advertising services.
(29) On this issue, the Commission considered that technical integration between WA and FB was unlikely to be as straightforward from a technical perspective as presented by third parties. This assessment was based on submissions by the Notifying Party highlighting, for example, the difficulty of matching WA users' profiles automatically and reliably with those users' profiles on FB (and vice versa ). Moreover, the Commission concluded that, even if some integration of WA with FB were to take place post-Transaction, its competitive impact would be mitigated by the fact that there was already a significant overlap between their respective
(^13) WhatsApp Inc. did not sell any form of advertising and does not do so today.
not to supply incorrect or misleading information as described in Article 14(1)(a) and (b) of the Merger Regulation.
(38) On 20 December 2016, the Commission issued a statement of objections (" the Statement of Objections ") pursuant to Article 18 of the Merger Regulation addressed to Facebook. In the Statement of Objections, the Commission stated that it had come to the preliminary view , with respect to the possibility of matching FB IDs automatically with WA users' mobile phone numbers, that: (i) Facebook, Inc. had intentionally or at least negligently supplied incorrect or misleading information in the final Form CO in the context of Case No. M.7217 – Facebook/WhatsApp ; (ii) Facebook, Inc. had intentionally or at least negligently supplied incorrect or misleading information in the Reply of 23 September 2014 provided in response to the RFI of 18 September 2014 made pursuant to Article 11(2) of the Merger Regulation in the context of Case No. M.7217 – Facebook/WhatsApp; (iii) fines should be imposed on Facebook, Inc. in accordance with Article 14(1)(a) and Article 14(1)(b) of the Merger Regulation.
(39) In its letter accompanying the Statement of Objections, the Commission offered Facebook the opportunity of submitting observations on the objections raised in the Statement of Objections, in accordance with Article 18 of the Merger Regulation and Articles 13 and 14 of Commission Regulation (EC) No 802/2004^14 (" the Implementing Regulation "), both in writing and at an oral hearing. In order to assist Facebook in the preparation of its observations, the letter also offered Facebook the opportunity of consulting non-confidential versions of the documents in the Commission's file in accordance with Article 18 of the Merger Regulation and Article 17 of the Implementing Regulation (" access to the file ").
(40) On 13 January 2017, Facebook asked for an extension of the deadline to respond to the Statement of Objections until 17 February 2017, which the Commission granted on the same day. Subsequently, at Facebook's request, the deadline was further extended until 15 March 2017.
(41) On 14 March 2017, Facebook submitted its response to the Statement of Objections (" the SO Response "). In the SO Response, Facebook: (i) acknowledged the essence of the facts contained in the Statement of Objections as well as that the information it provided to the Commission was incorrect and misleading within the meaning of Article 4(1) of the Implementing Regulation and Article 14(1) of the Merger Regulation and that its conduct was negligent within the meaning of Article 14(1) of the Merger Regulation; (ii) confirmed that it did not envisage requesting access to the file or an oral hearing; (iii) did not dispute that the information concerning the possibility of matching FB IDs automatically with WA users' mobile phone numbers that was supplied by
(^14) Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC)
No 139/2004 on the control of concentrations between undertakings (OJ L 133, 30.04.2004, p. 1-39).
Facebook in the final Form CO and in the Reply of 23 September 2014 was relevant for the Commission’s assessment of the Transaction; and (iv) agreed to receive this Decision in English.
(42) Facebook submitted these comments in the context of a cooperation process and contingent upon the fine not exceeding a certain limit, as well as subject to the following conditions: (i) Facebook's conduct being qualified as negligent or at least negligent;^15 and (ii) The Commission stating that the information supplied by Facebook did not have any impact on the ultimate outcome of the competitive assessment of the Transaction undertaken in the Article 6(1)(b) Decision.^16
(43) The Advisory Committee discussed the draft of this Decision on 27 April 2017 and on 11 May 2017 and issued a favourable opinion.^17
(44) The proceedings during the period between the First Briefing Paper and adoption of this Decision is referred to hereinafter as " the Current Proceedings ".
1.5. The update to WA's Terms of Service and Privacy Policy
(45) In the First Briefing Paper, Facebook, Inc. explained that WhatsApp Inc. planned to launch an update on or around 28 July 2016 to WA's Terms of Service and Privacy Policy (" the Update "). The Update was eventually released on 25 August 2016 and was the first update of WA's privacy policy since completion of the Transaction.
(46) The Update aimed to (i) reflect certain new features of WA, including end-to-end encryption of message content, "WhatsApp Calling" and "WhatsApp Web"; (ii) introduce commercial messaging between businesses and users, allowing businesses to send promotional messages to their customers via WA; and (iii) enable Facebook, Inc., and subsidiaries of Facebook, Inc., to gain access to and use certain WA users' data, subject to a user control.^18
(47) The data items that WA, subject to user consent, would share with Facebook after the Update would be the following: […].^19
(48) In the First Briefing Paper, Facebook, Inc. explained that some of the uses it contemplated for the data shared by WhatsApp, Inc. were: (i) […];
(^15) See Section 2.2.3.2. (^16) See Section 1.3. (^17) At the Advisory Committee of 27 April 2017 all Member States present unanimously agreed that two
infringements can be established and that accordingly fines should be imposed pursuant to Article 14(1)(a) and 14(1)(b) of the Merger Regulation.. At the Advisory Committee of 11 May 2017 all Member States present unanimously agreed with the factors taken into consideration by the Commission for the purposes of determining the level of the fines to be imposed and with the actual level of the fines proposed by the Commission. (^18) Existing WA users were given the chance to opt out of the Update. Existing WA users who had chosen
to accept the Update were given an additional 30 days to change their choice by modifying WA's account settings. After expiry of that additional 30-day period, their choice became irrevocable. The updated privacy policy applies automatically to new WA users. […]. See, in this regard, the reply to the Commission's RFI No. 3, questions 24 and 25. (^19) See the Second Briefing Paper, p. 12-13; the reply to RFI No. 1, question 10; the reply to the
Commission's RFI No. 3, question 29.
can directly query other Facebook family apps’ Phone IDs in a round robin fashion^29 to update its own Phone ID with the oldest one.^30 (iii) for Windows OS, […].^31 (iv) for other OSs (such as Blackberry, Nokia S40 and Nokia Symbian S60) Facebook submitted that it did not intend to implement the Phone ID Matching Solution because it planned to stop supporting the WA app on these platforms by the end of 2016.^32
(51) In its reply to RFI No. 1, Facebook also explained that the Phone ID Matching Solution was not engineered for the purpose of cross-platform messaging and that it was not clear whether it would be sufficient to support such functionality, nor did Facebook have any plan to allow cross-platform communication between FBM and WA.^33
2. LEGAL ASSESSMENT
2.1. Procedural obligations
(52) Recital 5 of the Implementing Regulation states that: " It is for the notifying parties to make a full and honest disclosure to the Commission of the facts and circumstances which are relevant for taking a decision on the notified concentration ."
(53) Article 3(1) of the Implementing Regulation provides that the notifications " shall be submitted in the manner prescribed by Form CO as set out in Annex I " and Article 4(1) of that Regulation provides that the information contained in notifications " shall be correct and complete ". Annex I of the Implementing Regulation (Form CO) requires the following declaration to be signed by or on behalf of all the notifying parties: " The notifying party or parties declare that, to the best of their knowledge and belief, the information given in this notification is true, correct, and complete, that true and complete copies of documents required by Form CO have been supplied, that all estimates are identified as such and are their best estimates of the underlying facts, and that all the opinions expressed are sincere ."^34
(54) Point (a) of Article 14(1) of the Merger Regulation allows the Commission to impose fines on the persons referred to in Article 3(1)b of that Regulation, undertakings or associations of undertakings " where, intentionally or negligently : (a) they supply incorrect or misleading information in a submission, certification, notification or supplement thereto, pursuant to Article 4, Article 10(5) or Article 22(3) ”.
(^29) That is to say, an arrangement that chooses all elements in a group equally in some rational order,
usually from the top to the bottom of a list and then starts again at the top of the list and so on. (^30) Reply to RFI No. 1, question 5, p. 7. (^31) Reply to RFI No. 2, question 8 b., c. and d., p. 7- (^32) Reply to RFI No. 2, question 8 a., p. 7-8. (^33) Reply to RFI No. 1, question 11 and footnote 14. In its reply to RFI No. 1 Facebook also identified
several accuracy shortcomings that make it unlikely that the Phone ID Matching Solution would be suitable to support cross-platform messaging, such as the fact that the solution does not take into account cases involving multiple FBM users sharing a single device nor platforms where the Phone ID Matching Solution is not available. (^34) Implementing Regulation, Annex I, Form CO relating to the notification of a concentration pursuant to
Regulation (EC) No 139/2004, Section 11.
(55) Point (b) of Article 14(1) of that Regulation allows the Commission to impose fines on those persons, undertakings or associations of undertakings " where, intentionally or negligently: (b) they supply incorrect or misleading information in response to a request made pursuant to Article 11(2) ".
2.2. Infringement
(56) Within the legal framework referred to in Section 2.1 and on the basis of the evidence contained in the case file, the Commission considers that, with respect to the possibility of matching FB IDs automatically with WA users' mobile phone numbers, Facebook, Inc. has: (i) at least negligently supplied incorrect or misleading information in a notification made pursuant to Article 4 of the Merger Regulation in the context of Case No. M.7217 – Facebook/WhatsApp , and (ii) at least negligently supplied incorrect or misleading information in response to a request made pursuant to Article 11(2) of the Merger Regulation in the context of Case No. M.7217 – Facebook/WhatsApp.
(57) The Commission's analysis in reaching these conclusions is set out in the recitals in this Section.
(58) The Commission's conclusions set out in this Decision are based on evidence collected from the case file in Case No. M.7217 – Facebook/WhatsApp^35 as well as on subsequent submissions and replies to the RFIs made by the Commission referred to in recitals (31), (33) and (36).
2.2.1. Facts
2.2.1.1. Information provided in relation to user matching possibilities during the Merger Review Proceedings
(59) Both before and after the formal notification, the Commission asked the Parties questions about the possibility of matching FB and WA accounts. The Commission's questions and the statements provided by the Notifying Party in response to those questions are summarised in recitals (60) to (64). (i) Pre-notification discussions and the final Form CO
(60) During the pre-notification discussions, the Commission raised the issue of whether "[p] ost-acquisition, [the Notifying Party was] planning to link/match in any way customers' profiles on WhatsApp with these customers' profiles on Facebook (e.g. by linking customers' mobile numbers from WhatsApp to these customers' Facebook accounts) ".^36
(^35) All correspondence between the Commission and the Parties (or any one of the Parties) in the context of
Case No. M.7217 – Facebook/WhatsApp from 7 March 2014 (that is, the date of initiation of pre- notification contacts) has been included in the case file relating to this investigation. In particular, this includes the Parties' responses to the questions pre-notification and to the RFIs made pursuant to Article 11 of the Merger Regulation, all other emails (including attachments) exchanged between the Parties (or any of them) and the Commission, as well as other submissions addressed by the Parties (or any of them) to the Commission. (^36) Question 5 of the questions sent by the Commission on 25 August 2014.
phone numbers or WhatsApp users would need to register with Facebook and create Facebook IDs and profiles…. The “one time federation effort” to which the Paper rather disingenuously refers would require significant effort relating to hundreds of millions of users, and its success or failure would rest in the hands of users, not Facebook, which means that in all likelihood Facebook would be unable to match accounts for a material proportion of users. "^41 Moreover, the Parties stated that " The issue is whether Facebook knows the one thing about the user (other than name) that WhatsApp also knows – the user’s current mobile phone number(s). Nothing else in a user’s Facebook profile will enable matching, and WhatsApp stores very little user data beyond the mobile phone numbers in the user’s handset’s native address book. The Paper baldly [sic] asserts that “[t]heir [sic] is minimum user interaction required to grant Facebook access to the WhatsApp user ID”. This is simply not true. Because it is not possible to “match” Facebook IDs with each WhatsApp mobile phone number ID associated with the individual user on an automated basis, the matching would need to be done manually, by users ".^42
2.2.1.2. Information provided during the Current Proceedings as to the availability of the Phone ID Matching Solution during the Merger Review Proceedings
(65) The information provided by Facebook during the Current Proceedings about the availability of the Phone ID Matching Solution at the time of the Merger Review Proceedings is summarised below. This information is derived both from Facebook's written submissions to the Commission^43 and from Facebook's internal documents supplied as part of its reply to RFI No. 1.^44
(66) At the time when the final Form CO and the Reply of 23 September 2014 were being submitted, during the Merger Review Proceedings, Facebook personnel were exploring ways to match IG and FB users. To that end, they were discussing the possibility of matching users based on Phone IDs and they had already identified the Phone ID Matching Solution, the solution which lies at the core of the user matching approach pursued by Facebook in connection with the Update.
(67) However, the extent to which the Phone ID Matching Solution was available in 2014, and particularly at the time of the Merger Review Proceedings, was not the same for the two main types of OS (iOS and Android OS).^45
(^41) Reply of 23 September 2016, p. 1 (^42) Reply of 23 September 2016, pp. 5-6. (^43) First Briefing Paper, submitted on 30 June 2016; reply to RFI No. 1, submitted on 3 August 2016;
Second Briefing Paper, submitted on 3 August 2016; reply to the Commission's RFI No. 2, submitted on 16 August 2016; Third Briefing Paper, submitted on 7 September 2016. (^44) Facebook's internal documents FX_00016656 to FX_00016657; FX_00015373 to FX_00015386; FX
00015426; FX 00015425; FX_00015498; FX_00015496; FX_00015747 to FX_00015748; FX_00015495; FX_00015949 to FX_00015954; FX_036; FX_00003441; FX_00016450; FX 00015360 to FX 00015367; FX 00015333; FX_00003417; FX_00025266 to FX_00025268; FX_129; FX_052. (^45) As explained in recital (80), at the time of the Merger Review Proceedings, Android OS and iOS
together accounted for at least 80% of smartphone operating systems in the EEA. Given their limited significance at the time of the Merger Review Proceedings, Windows OS and the other OSs (such as Blackberry, Nokia S40 and Nokia Symbian S60) will not be discussed further in this Decision. Moreover, as regards Windows OS, Facebook submitted that it had not conducted the technical due diligence to implement the Phone ID Matching Solution (see recital (50)(iii)) and, as regards other OSs, Facebook submitted that it did not intend to implement the Phone ID Matching Solution because it planned to stop supporting WA app on these platforms by the end of 2016 (see recital (50)(iv) above).
(68) With respect to Android OS devices, during the Merger Review Proceedings, Facebook personnel had identified a mechanism to implement the Phone ID Matching Solution without having to change the apps' publisher.^46
(69) With regard to iOS devices, during the Merger Review Proceedings,^47 Facebook personnel were aware of the possibility of implementing the Phone ID Matching Solution by changing the apps' publisher.
(70) Furthermore, although the efforts being made by Facebook personnel to enable user matching were specifically aimed at matching FB and IG accounts, the Phone ID Matching Solution and the mechanisms needed to implement it on the different OSs were (and are) potentially applicable to any app belonging to Facebook. Indeed, during the Merger Review Proceedings, Facebook personnel were considering implementing the Phone ID Matching Solution to match users automatically across FB and WA once WhatsApp Inc. was acquired by Facebook.^48
(71) In addition, although Facebook's efforts were specifically aimed at matching FB and IG accounts for de-duplicating purposes^49 , the Phone ID Matching Solution and its implementing mechanisms could equally be used to match users across Facebook apps for other purposes (such as advertising purposes).
2.2.2. Facebook’s views
(72) In the SO Response, Facebook acknowledged the essence of the facts described in Section 2.2.1 of this Decision.^50 Moreover, it acknowledged that, in responding to both of the questions asked by the Commission detailed in Section 2.2.1.1, it interpreted those questions as relating to the possibility of conducting automatic user matching across the FB and WA user bases to enable cross-platform integration or cross-platform messaging between the two services.^51
(73) Facebook also acknowledged that, based on its interpretation of those questions , it did not […] disclose to the Commission the fact that […] certain personnel […], were […] aware of the possibility and investigating the feasibility of relying on the Phone ID Matching Solution to match FB and IG users automatically for the purposes, inter alia, of de-duplicating users across the Facebook family of apps (but not for the purposes of enabling cross-platform integration or messaging, which would require a higher confidence level in matching users across services).^52 In particular, according to Facebook, these personnel had identified a mechanism whereby they believed that they would be able to implement the Phone ID Matching Solution with regard to Android OS devices without the need to change the apps’ publisher, and were aware of the possibility of implementing the Phone ID Matching
(^46) For the precise dates on which this mechanism was first identified, see Facebook's submissions and
internal documents cited in footnotes 41 and 42. (^47) For the precise dates on which this possibility was first identified, see Facebook's submissions and
internal documents cited in footnotes 41 and 42. (^48) For the precise dates on which this was first considered, see Facebook's submissions and internal
documents cited in footnotes 41 and 42. (^49) That is to say, to avoid counting twice a customer who has accounts, for example, on both FB and IG. (^50) SO Response, paragraphs 5-7 and 9-10. (^51) SO Response, paragraph 8. (^52) SO Response, paragraph 9.
knowledge and belief of the undertakings supplying the information to the Commission, true, correct and complete.^58
(79) In concluding that the information provided in the final Form CO and in the Reply of 23 September 2014 was incorrect or misleading within the meaning of Article 14(1)(a) and (b) of the Merger Regulation and Article 4(1) of the Implementing Regulation, the Commission takes into account the points set out in recitals (80) to (84).
(80) First, as explained in Section 2.2.1.2, at the time of the Merger Review Proceedings, it was already technically possible to automatically match users' profiles of different apps. This was true at least for Android OS, but it was also true for iOS provided the apps had the same publisher. In this regard, the Commission notes that, at the time of the Merger Review Proceedings, Android OS accounted for at the very least 60% of smartphone operating systems in the EEA, while iOS accounted for around 20%.^59
(81) Second, despite the availability of these automated matching solutions, as illustrated in Section 2.2.1.1, in the final Form CO Facebook, Inc. stated that user matching between FB and WA would either have to be done manually by FB/WA users, and would therefore be insufficient and unreliable, or it would require significant re- engineering by Facebook of the apps' code. Moreover, in the Reply of 23 September 2014, Facebook, Inc. submitted that user matching could not be done automatically and would need to be done manually.
(82) Third, the Commission's question referred to in recital (60) during the pre- notification discussions was clear and specifically referred to the possibility of user matching in general, not merely user matching required for the purposes of enabling cross-platform integration or messaging. Likewise, the Commission's question in the RFI of 18 September 2014 referred to in recital (63) covered the entirety of the Third Party Paper, including the integration option based on federation of users’ profiles.^60 Therefore, a reply to those questions that was correct and not misleading would not have been limited to discussing user matching for cross-platform communication purposes or at least, if it was limited to user matching for cross-platform communication purposes, its scope should have been clearly specified.
(83) In this respect, the Commission notes that, in the SO Response, Facebook acknowledged that the Commission's questions related to the possibility of user matching in general and not merely to user matching required for the purposes of
(^58) See Article 4, and Section 11 of Annex I, of the Implementing Regulation. See also Recital 5 of the
Implementing Regulation, cited supra. (^59) Based on the reply to RFI No.1, Annex. The source of the user base figures and the share estimates
provided in the reply to RFI No.1 is the “ Strategy Analytics for 2013 – Global Smartphone User Base Forecast by OS for 88 Countries: 2007-2017 ”, of June 2013 (the basis for the multi-homing, app usage and frequency of use data provided in the Form CO). It appears that these figures are highly conservative as they constitute ex ante estimates and are much lower than the other dataset publicly available. For example, Facebook's estimates of Android OS and iOS shares in the EEA are much lower than in Kantar Worldpanel ComTech's " Smartphone OS sales market share " (available at http://www kantarworldpanel.com/global/smartphone-os-market-share/), which is based on the research extracted from the Kantar Worldpanel ComTech global consumer panel and refers to 3-month periods ending with the stated month. Indeed, according to Facebook's estimates, Android OS's shares in 2014 in Italy, France, Spain, Germany and the United Kingdom were respectively 59.4%, 55.9%, 67.1%, 58.1% and 50.9% while, according to Kantar Worldpanel ComTech, those shares stood respectively at 73%, 76.2%, 88.1%, 83.2% and 59.3%. (^60) See recital (62).
enabling cross-platform integration or messaging^61 , and that it did not make sufficiently clear in the final Form CO and in the Reply of 23 September 2014 that its description of the difficulties of automatic user matching across user bases applied solely to the type of user matching required for the purposes of enabling cross- platform integration or messaging and did not apply to user matching more generally.^62
(84) Finally, the Commission notes that, in the SO Response, Facebook acknowledged that the information it provided to the Commission was incorrect or misleading within the meaning of Article 14(1)(a) and (b) of the Merger Regulation and Article 4(1) of the Implementing Regulation.^63
2.2.3.2. Facebook, Inc. acted at least negligently
(85) In concluding that Facebook, Inc. acted at least negligently, the Commission takes into account the points set out in recitals (86)to (91).
(86) First, at the time of the Merger Review Proceedings and, in particular, when submitting the final Form CO (on 29 August 2014) and the Reply of 23 September 2014, Facebook was or should have been aware that automated matching between a user's FB and WA accounts was or would become possible. In particular, at the time of submitting the final Form CO and the Reply of 23 September 2014: (i) Facebook personnel were aware of the possibility, and were investigating the feasibility, of relying on the Phone ID Matching Solution to match FB and IG users automatically; (ii) Facebook personnel had identified a mechanism to implement the Phone ID Matching Solution on Android OS devices without having to change the apps' publisher; (iii) Facebook personnel were aware of the possibility of implementing the Phone ID Matching Solution on iOS devices subject to the need to change the apps' publisher; (iv) although Facebook personnel's efforts to enable user matching were specifically aimed at matching FB and IG accounts, the Phone ID Matching Solution and its implementing mechanisms were potentially applicable to any app belonging to Facebook. This is also confirmed by the fact that Facebook envisaged implementing the Phone ID Matching Solution to match users across FB and WA automatically once WhatsApp Inc. was acquired by Facebook; and (v) while Facebook personnel's efforts were specifically aimed at matching accounts for de-duplicating purposes, the Phone ID Matching Solution and its implementing mechanisms could equally be used to enable automatic user matching for other purposes , such as for advertising purposes (as Facebook was subsequently planning to do in connection with the Update).
(87) The Commission notes that each of the facts mentioned under points (i)-(v) of recital (86) have been specifically acknowledged by Facebook, as explained in recitals (72) and (74).
(^61) SO Response, paragraph 12. (^62) SO Response, paragraph 11. (^63) SO Response, paragraph 13.
